Dollars & Sense: What you need to know about audits

Tuesday

Feb 12, 2013 at 11:00 AM

Few words in the English language set off alarm bells like the word “audit.” The good news is there are ways to reduce the likelihood the Internal Revenue Service will tag you for an audit. Nevertheless, if a letter from the IRS does appear in your mailbox, don’t panic.

Statistically, the IRS only audits about one percent of taxpayers with incomes under $200,000, according to the tax experts at the Oklahoma Society of Certified Public Accountants.

But what do you do if an audit is inevitable? Knowing what to do if the IRS does come calling can help put your mind at ease. Remember, you are entitled to ask why you are being audited. Stay calm, contact the IRS and respond to all requests from the agency in a timely fashion.

Here is a suggestion if you need to prepare for an audit:

Understand the details. There are three primary types of audits. Which type should you prepare for?

• A correspondence audit, handled entirely by mail, whereby the IRS seeks supporting documentation for an item on your return;

• An office audit, at a nearby IRS office, to review a few items on your return; or

• A field audit at your home or business, with a thorough review of items on your return.